Wednesday, October 15, 2008

Nurturing the Entrepreneurs Breed.

Just as a plant doesn’t grow with water alone, a startup enterprise cannot blossom only with money. It needs an eco-system that promotes entrepreneurship in addition to early-stage funding. India has not been able to spawn as many entrepreneurs as it can, because of the lack of such support systems. In the last few years, however, beginnings have been made by academic and industry bodies to join hands with funding institutions and nurture networks of entrepreneurs, mentors, customers and skilled workers.

A popular link in this chain is the business plan competition, in which aspiring entrepreneurs pitch their business plans to venture capitalists. The best ones sometimes get funding for their ventures, but everyone gets the lasting benefits of networking, mentoring, and learning from peers.

These contests can be as challenging as the marketplace itself. An entrepreneur needs to give a clear strategic perspective on the demand for one’s business, chart the cash flow and outline competitive advantages. For start-ups with all the elements drawn up, these contests can open the doors to success.

While entrepreneurs are unlikely to get VC funding only on the basis of their business plan presentation at such contests, they will be able to take home exposure to a professional audience and feedback from a panel of judges who had nurtured startup businesses either as investors or founders, says Alok Mittal of Canaan Venture Partners. “The entrepreneurs get visibility in the right context. VCs and potential investors know the winners are chosen from a large number of entries.”

One such event helped Abhishek Sinha finetune his business idea for a mobile phone payment system aimed at bringing daily wage earners under the banking system. He presented his plan at a contest organised by The Indus Entrepreneurs (TiE) in Mumbai last year, which helped him get feedback from industry veterans such as Raman Roy, Pramod Bhasin, Mahesh Murthy and Saurabh Srivastava. “To get a validation of my business plan from them was a tremendous boost,” says Mr Sinha.

At the time of the event, he was already running a company and was in talks to sell it off. Once the sale was concluded, he used the proceeds to start another company, Eko Financial Services, to give shape to the new plan. He had initially thought of a product model, but the feedback at the contest helped him re-focus his business into a service model. The exposure also helped him to network with other experienced professionals and rope in Sanjay Bhargava, a former employee of Paypal, as co-founder.

TiE has also teamed up with Wadhwani Centre for Entrepreneurship Development at the Indian School of Business to organise TiE-ISB Connect. In its third year now, the event provides an opportunity for entrepreneurs — both in the early stage as well as the growth phase — to meet venture capitalists, successful entrepreneurs, analysts and academicians in sessions over three days. This year’s event will be held in Hyderabad in the second week of November. About 60 venture capital firms, which have over $5 billion in India-focused investments, will be present. Last year’s event saw the participation of NEA Indo-US Ventures, Canaan Partners, Battery Ventures, Lightspeed and Helion Ventures. The last date for submitting business plans for this event is August 31, 2007.

Institutes Play A Crucial Role

It is still early to say if these events hold the answers to solving India’s entrepreneurship problems. But they are a step in the right direction. In the West where such competitions have been around for much longer, they have yielded good results. One example is the MIT Entrepreneurship Center that runs one of the best known entrepreneurship competitions called the MIT $100 K for its students and researchers. MIT $100 K, which has been around for the last 18 years, has created over 60 firms, 1,800 jobs and raised $175 million in venture capital so far.

Academic institutions are a critical constituency of the entrepreneurial ecosystem and institutes in India are beginning to take a lead at grooming entrepreneurs. For example, IIM Bangalore in association with the Nadathur S Raghavan Center for Entrepreneurial Learning conducts a management programme for women entrepreneurs at the IIM-B campus. Held every summer since 2004, the programme takes in 60-70 participants for a fee of Rs 15,000. The programme is spread over six weeks and helps the participants get a basic understanding in finance, business strategy, sales and marketing, managing people, negotiation and other basics of management. All participants submit a business plan at the end of the programme and the two best business plans are awarded. This programme is inspired by the Oxford Brookes University, which has a programme to train women entrepreneurs in tourism.

Over the years there has been an increase in the number of B-School graduates wanting to start their own ventures on graduating. In 2006, nine students of IIM Lucknow, including the batch topper, opted out of final placements in order to start their own company. To meet their needs, IIM Lucknow started an entrepreneurial cell at the school called Abhiyaan. Among its other activities, Abhiyaan organises business plan workshops and an annual national level business plan competition called Nirvaan, which is open to all business and engineering schools across the country. Nirvaan 2006 saw participation from 40 schools and 550 participants who battled it out for prizes worth Rs 7.5 lakhs and a chance to get funding.

IIM-L students who start their companies while still on campus are provided facilities, mentorship, and networking and business opportunities with the help of faculty, the IIM-L alumni community and Abhiyan partner organisations. Two such firms, including a guitar school chain, are being mentored this year.

In TiE-ISB business plan contest in 2006, 20 entrepreneurs were chosen from 200 applicants, made presentations to a VC panel. In 2005, 14 entrepreneurs were selected for presentations. The organisers are reluctant to share the amount of money that these companies have raised since those meetings. “This is not a speed dating service, but more of an opportunity for entrepreneurs and investors to meet each other,” says Sateesh Andra, Venture Partner, Draper Fisher Jurvetson. After the event, TiE-ISB continues to mentor the selected startups.

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